Does The Intention Required For A Quistclose Trust Differ Onshore To Offshore?

Recent English case law has served to emphasise the requisite levels of intention needed on the part of the transferor for the creation of a Quistclose trust or any other sort of analogous resulting trust. In both the cases of Bellis & Ors v Challinor & Ors [2015] EWCA Civ 59 and Gore & Ors v Mishcon de Reya [2015] EWHC 164 (Ch), the court found that monies held in a solicitor's client account were held on bare trust for that client. Clear intention would have been required on the part of the transferor that the monies be used for an express purpose for the outcome of either case to have been any different.

Bellis v Challinor

In this case, monies were paid by investors in to a solicitor's client account as part of an investment into a property scheme. A Guernsey company, the solicitor's client, had been set up specifically for the purpose of acquiring the land with the assistance of bank funding. The land had already been purchased by the time the investors invested, and the aim was that the investors would later receive an interest in an offshore unit trust which would be set up at a later stage, and that loan notes would be issued to each investor. In the event, much of the investment money was used to reduce the short-term borrowing from a bank, some was spent on solicitors' fees, and the company was placed in insolvent administration without having set up the unit trust or issued the loan notes.

The investors sought to recover their money from the solicitors claiming, among other things, that the firm held the funds on trust for the investors. The claim that monies were held in a Quistclosetrust type arrangement was rejected by the court of appeal and the judge instead found that the monies paid into the solicitor's client account were provided as loans to the company. The judge emphasised that there must be an intention to create a trust on the part of the transferor and, upon his review of the facts of the case, could find no evidence of such an intention on the part of the investors.

Gore & Ors v Mishcon de Reya

This was another case that involved monies being raised for a property investment, this time by procuring a bank guarantee which would be cashed (in the sense of procuring a loan facility to be secured by the bank guarantee). Monies were paid by investors to the solicitors to assist with obtaining the bank guarantee, but these were instead kept by the client in what the judge opined was almost certainly an 'advance fee...